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A troubled world

Published Monday, June 29th, 2015

Events are moving so quickly that by the time this report is read it may be out of date. However what will not have changed is that we are living in a very troubled world. A world of religious fanaticism, of nationalism, of droughts and floods, of mass population movements, of sub normal interest and inflation rates, of bloated asset values, of rising debt and one in which electorates have lost faith in their governments and respect for their institutions. In short it is a sub normal world which threatens to worsen rather than improve. The question for those of us in the commodity space is whether this is a bullish or bearish world for commodity prices and more specifically for oil prices.

We are a world at war where religious fanaticism has reached new levels and promises to escalate further. Oil fundamentals in terms of supply and demand forecasts are overwhelmingly bearish but the oil price drivers over the next six months will come as much and probably more from the economic, financial and geopolitical front as from the oil balance. The factors will ebb and flow in importance, even disappearing for a period, before returning violently to transform sentiment. All the signs are that we are in for a difficult, volatile and unpredictable six months where the best laid trading and hedging plans could be torn to shreds overnight. The knowns, known unknowns and unknown unknowns will all be battling each other on the price playing field at the same time.

Islamic extremists are at war with themselves in the conflict between Sunnis and Shias and with other religions. It would appear that no country is safe from their fanaticism. Tunisia, France and Kuwait all suffered from their hatreds last Friday and it is inevitable that there is a lot more brutality to come which will in turn stoke nationalism, making for a very dangerous spiral. A whole series of countries are going to find that their tourist industries will be devastated leading to economic collapse and poverty, feeding the cycle.

to read the rest of the report, please click here

Posted by David Hufton